How Shops Compensate Technicians: What Works? What Doesn't?

As virtually every Automotive Service Association (ASA) member will agree, there's a shortage of good technicians. Attracting them and keeping them are vital if your business is to survive. That's where compensation plays a big role; however, also key are nonfinancial rewards (benefits) and intangible incentives.

What's the best way to compensate a technician? What works, what doesn't?

Shop owners don't always agree on the best way to compensate a technician. Some favor the salary form of compensation, others like paying by the hour, some by flat rate, and others by commission.

Earl Copeland, AAM, who has been operating Earl Copeland Garage Inc. in Valdosta, Ga., for 31 years, likes paying his technicians by straight salary. "There are a lot of pros and cons to that method of paying, but in our shop, it just works better," Copeland said. "We used to pay a commission on labor, but sometimes they'd have a good week, sometimes a bad week. This way, they know what they're going to make, and it's better for our customers and bookkeeping too."

David B. (Dave) Zwalina, AAM, the owner of Automotive One Inc. in Longwood, Fla., and an affiliate director on the national board of ASA, favors paying his technicians a flat rate. "We pretty much follow a structured labor guide to determine how much a repair job will cost a customer and our technicians get paid a percentage of that. But say the labor guide allots three hours for a job and the technician completes it in two and a half hours; he still gets paid for three hours. We work 45 hours a week but the average technician can turn 50 to 55 hours of work, for which he is paid."

Zwalina said some tasks - like changing oil, cleaning fuel injectors, servicing transmission systems, and brake work - are what they call "menu-type items" for which there is a set fee and technicians get paid at a set rate for those chores.

He also said that if a technician has a "comeback," a repair job that must be done over or fixed, the technician does not get anything for that. "We try to be very fair with our people and we probably pay them more than the industry average, but we expect them to do good work so the customer won't bring the car back."

Don Whitehead, the owner of Quality Body Works in Midland, Texas, also prefers the flat rate for compensating his technicians. Whitehead said he uses a computer-based estimate to figure a job and a technician gets paid at his hourly rate based on the computerized flat rate for that particular job. If there is hidden damage and the job requires additional time, the technician gets additional pay based on the revised flat rate.

Whitehead said his shop tries to do everything it can to help the technicians be more efficient. "We try to keep them working," he said. "The first six months I was here, I didn't write an estimate; I just watched the work flow. That scared some of my people, but it paid off when we started making the operation more efficient. At least one worker told me he had noticed his check getting bigger and bigger, and it was simply because we did everything we could to help our people be more productive." For ex- ample, Whitehead pointed out that in many small shops, workers have to jockey cars around. "We don't have much of that," he said. "Our people have plenty of room in which to work and they don't have to wait on parts. If there is a delay, they can use that time to work on another job because each technician has multiple work stalls."

Kevin Caldwell, AAM, director of ASA's Collision Division and owner of Autobody by Caldwell Inc. in Laguna Hills, Calif., compensates his technicians on a flat rate commission basis. "If it is by the hour, as the work gets slow, the technicians get slower; if the work is heavy, they still won't do more," said Caldwell. "There's no incentive."

Caldwell said that his flat rate commission basis rewards the technicians who are productive. "If a job is estimated at four hours and if they do it in less time, they can make more."

Rick Sharbrough, AAM, director of ASA's Mechanical Division and owner of Rick's Hi-Tech Auto Care in Katy, Texas, pays his technicians a flat rate but has a built-in incentive for them to do better. "We use labor guides to estimate jobs and if it only takes a technician two and a half hours to do a three-hour job, he will get paid for three hours," said Sharbrough.

Sharbrough also provides a bonus incentive for his technicians. "Every day a guy works eight hours billed out to customers, he will get a $10 bonus," he said. "If he works enough in a week's time to bill out more than 40 hours to customers, he will get a $50 bonus. For every additional 10 hours he works that are billed out to customers, he gets a $100 bonus. For 50 hours billed out, a technician will get a $150 bonus; for 60 hours, a $250 bonus; and for 70 hours, a $350 bonus. I pay these cash bonuses every Monday morning and they are posted on a board for all to see, so it keeps my people competitive."

Sharbrough said the bonuses are available to all of his technicians; they all have an opportunity to make the money - it just depends on their productivity. That way, no one accuses him of favoritism, he said.

Don Seyfer, AAM, a past chairman of ASA and owner of Seyfer Automotive in Wheat Ridge, Colo., compensates his technicians by what he calls "performance-based pay." Seyfer said that if a job calls for three hours and a technician can do it in two hours, the technician will make more because he gets an hourly rate. But if a job is estimated at four hours and it takes the technician five and a half hours to do the job, the technician will still get paid for four hours.

Michael Draskovic, owner of Mike's Auto Tech in Glendale, Ariz., prefers compensating his technicians by the hour. "I've explored other options, but hourly works best for us," said Draskovic. "We think paying by the hour cuts down on rivalry in the shop, and paying by the hour is better than a flat rate because, in a flat rate system, the mechanic is racing against the clock."

Draskovic said he instills in his technicians that they are providing a professional service and that he wants them to give him accurate time and an accurate list of parts. "I think the hourly rate keeps everyone honest and the customer wins," said Draskovic.

Edward Day, of Collision Restoration in Fairfield, N.J., is another shop owner who favors paying by the hour. Day said he might pay a flat rate if the layout of his shop provided "better flow." He said, "We're a high-volume shop, but the layout of the shop isn't perfect - there are a few bottlenecks, and so I think our current pay formula is more fair to my technicians. My guys are paid very well."

Dale Wingate, AAM, owner of Wingate Body Shop Inc. in Findlay, Ohio, also pays his technicians by the hour.

Dale Feste, AAM, owner of Dale Feste Automotive in Hopkins, Minn., pays his technicians by the hour; however, he builds in an incentive for them to be productive. "We also keep track of their flat rate," said Feste. "We have an incentive grid based on the number of flat rate hours turned each week by each technician that results in added pay. In effect, we are saying, 'if you want to make more money, you've got to make more money for the shop.'"

William "Bill" Haas, AAM, owner of Milex Tune Up in Chicago, said he pays his technicians by commission. "I have a graduated pay scale for hours booked (hours billed to customers). We use labor guides to give our customer estimates, and if one of my guys books 30 hours or less, we pay him at a certain rate per hour. But we have pay increments so that the more the technician 'books,' the more he makes per hour."

Haas said the graduated pay scale provides an incentive for his technicians to perform well. "If a technician does a job in less time than the estimate, he can make more," he pointed out. "Conversely, if he takes more time, he can lose."

James "Jim" Overholser, owner of Eureka Body & Fender in Wyandotte, Mich., also pays by commission. He said his technicians get a percentage of what they "turn out."

Overholser said, "When they're on a percentage basis, they know you're being fair to them. We even give them a copy of the invoices so they see for themselves."

In all of the shops surveyed for this article, what an individual technician makes depends on his or her education, skills and capabilities. The more skilled, productive technician is paid at a higher rate than someone just starting out or with little experience.

So prized is education that most shops will pay for their employees' training, and then reward them for that training. For example, Haas pays his people an extra 25 cents an hour for each ASE certification they hold.

In addition to financial compensation, all of the shops provide benefits, which in effect is compensation too. All of the shops provide some type of health insurance. Other popular benefits include vacations, paid holidays, sick days and access to the ASA credit union. Nearly all of the shops provide uniforms. Some provide 401(k) plans or other types of savings programs, and at least one shop (Zwalina's Automotive One in Florida) will pay for short-term disability.

Virtually every shop awards extra "perks" to its technicians. For example, Caldwell lets his technicians work on their personal vehicles after shop hours, and pays all their expenses for attending the International Autobody Congress and Exposition (NACE). Feste also makes available unlimited use of his shop after work hours to his technicians for working on their own vehicles. Zwalina pays his technicians for time off on birthdays. Draskovic gives his technicians bonuses at Christmas, and Feste has a year-end profit-sharing plan in which an employee is fully vested after 5 years' service. Feste also provides his technicians insurance for loss or theft of tools (up to $50,000) and gives them 15-minute paid coffee breaks.

Draskovic provides safety training for his technicians and makes available to them safety glasses, ear protection devices, gloves, etc.

All of the shops prize their technicians and go to great lengths to keep them happy, well and productive. "We treat them with respect and dignity, try to provide a good working environment, and pay them what they are worth," Caldwell said. Sharbrough pointed up the importance of buying the latest equipment and keeping it updated. "We do everything we can to help our technicians be more efficient. We try to remove all the roadblocks or hurdles that will keep technicians from doing a good job."

Many shops, like Haas' business, try to create a "family atmosphere." Wingate admits he's a "people-person" and says he takes time to talk to his people. He wants to know if anyone in their families is sick and he does "little things" like buying doughnuts for his workers. Wingate also takes his employees and their wives out for dinner at Christmastime. If one of Feste's technicians has a child who is in a school performance during business hours, the technician can leave the shop long enough (with pay) to attend. "We're family-first here," Feste said.

Maybe Overholser best expresses the feelings of shop owners. "It's a changing world ... it's harder than ever to get and keep good technicians," he said. "When you do get a good technician, be fair to him."

Shops have various financial and nonmonetary methods of compensating technicians. As long as a shop's employees are productive and content, the shop owner can rest assured the shop has the "right" system in place.